An Investor’s Guide to the FTSE All-Share Index
The FTSE All-Share Index was once known as the FTSE Actuaries All Share Index and it is a market capitalisation weighted index that comprises about 1000 of over 2000 companies that are traded on the LSE (London Stock Exchange). It is an aggregation of three FTSE indices – the FTSE SmallCap Index, the FTSE 250 Index and the FTSE 100 Index. The FTSE All-Share Index aims to be representative of a minimum of 98% of the entire capital value of all of the UK companies that are eligible for inclusion. The base date of this index is the 10th April 1962 and it had an original base level of 100. In order to qualify for the FTSE All-Share Index, a company must have a full London Stock Exchange listing and a denominated price in Euros or Sterling on the SETS or SETSmm trading system, or alternatively a firm quotation on SEATS or SEAQ. There are also several other eligibility criteria that must be met. Despite the fact that the companies listed on this index have been screened for liquidity standards and minimum size, it is still believed to be the broadest measure of price performance in the London equity market and the majority of UK focused money is invested in funds that track this index. As it is such a broad representation of shares in the UK, this index is popularly used as a basis for investment products such as ETFs (Exchange Traded Funds) and Funds and all FTSE All-Share Index constituents can be found being traded on the London Stock Exchange’s SETSmm and SETS trading systems. Like most other FTSE indices, the All-Share index has a real time calculation, and prices are updated every fifteen seconds when the markets are open. The companies that are tracked on this index are also re-evaluated every quarter and adjustments are made at each meeting to ensure that the correct companies are represented.
Historical Facts About the All-Share Index
In 1962, the FTSE All-Share Index was launched with the name “FT Actuaries All-Share Index”. Originally, it was designed to be used for tracking derivatives and funds as well as being a performance benchmark. The Index had two new sub-indices added to it in 1984 and 1992 respectively. These were the FTSE 100 and the FTSE 250. In 1995, the Financial Times Stock Exchange (better known as the FTSE) was created as a joint venture between the Financial Times and the London Stock Exchange, when Standard & Poor’s purchased Wood Mackenzie’s share in the FT Actuaries All-Share Index. The London Stock Exchange Group own FTSE Russell, which manages the FTSE All-Share Index. It’s base value as of April 10th 1962 was 100 points, however in April 2015 it reached a peak of over 3,830 points.
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The Composition of the FTSE All-Share Index
An aggregation of three London Stock Exchange indices – the FTSE SmallCap Indices, the FTSE 250 and the FTSE 100, the FTSE All-Share Index includes over 600 listed companies that have a total market capitalisation of around £2 trillion. The average amount of market capitalisation for a FTSE All-Share Index listed company is £3.14 billion, with the smallest market capitalisation being £30 million and their largest being £88 billion. 3.73% is the average dividend yield for a company on the FTSE All-Share Index, and the weight of the index’s largest listing is 4.4%. The top ten companies listed on this index include such well known names as:
- HSBC Hldgs
- British American Tobacco
- Royal Dutch Shell A
- Royal Dutch Shell B
- Vodafone Group
- Lloyds Banking Group
All together, the top ten companies on the list account for an entire weight on the Index of 32.13%. Other well known companies that appear on the Index include Zoopla Property, WH Smith, Travis Perkins, Tesco, Stagecoach, Royal Bank of Scotland, Persimmon, Ocado, Ladbrokes, Kingfisher, J D Sports and Direct Line. The index is conveniently divided into several commercial and industrial sectors to enable investors to easily use sector specific yardsticks, such as chemicals or mining. The top sectors that are found represented on the All-Share Index include:
- The oil and gas sector
- Basic materials
- Consumer goods
- Consumer Services
What are the Rules for Inclusion on the FTSE All-Share Index?
To be eligible for inclusion in any of the FTSE index series, a company must meet strict minimum requirements with regard to free float, having a minimum of 25% free float for a UK incorporated issuing company or 50% for a non-UK incorporated company. A new listing is permitted to have a free float of as little as 5%, however the minimum requirements must be met within a year of the first day that the company trades. Securities also have minimum requirements that must be met in terms of liquidity, size and price and every company with eligible securities will be ranked by their full market capitalisation according to the amount of quoted equity capital they have. Annual reviews are held every June, and at that time, any company that has a full market capitalisation of more than 0.15% of the FTSE SmallCap Index’s full market capitalisation is added to the list of companies on the FTSE All-Share Index, however they must also meet all of the other essential FTSE criteria for eligibility. Any company that has a market capitalisation of under 0.10% of the FTSE SmallCap Index cannot be added to the FTSE All-Share Index and must instead by added to the FTSE Fledgling Index. There are reviews held every quarter i.e. in September, December and in March, and at these meetings any possible deletions or additions to the Index are determined. Securities listed on the Index must also meet essential liquidity requirements, turning over a minimum of 0.025% of their issued shares based on a monthly median for a minimum of ten out of the twelve months before the annual index review.
Other educational materials
- FTSE AIM All-Share Index
- Japanese Exchange Group (JPX)
- LSE – London Stock Exchange
- New York Stock Exchange (NYSE)
- Paris Stock Exchange – Euronext Paris
Recommended further readings
- “Stock prices, stock indexes and index funds.” Brealey, Richard A. Bank of England Quarterly Bulletin (2000).
- “Quantitative relations between risk, return and firm size.” Podobnik, Boris, Davor Horvatic, Alexander M. Petersen, and H. Eugene Stanley. EPL (Europhysics Letters) 85, no. 5 (2009): 50003.